GOP: Get Over Panic --- Dems are vulnerable on corporate scandals, too

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Panic is a sure sign of political weakness,
and Republicans on Capitol Hill have shown
enough of it in responding to the corporate
scandals to make one wonder how
coherent their campaign for Congress will
be.

At the Republican National
Committee meeting in San Francisco, many
attendees were concerned that battered
investors who normally vote Republican
might stay home out of disillusionment with
the economy. But there was no panic, with
some delegates even expressing concerns
at the White House's willingness to sign
any legislation with an anticorporate label
on it. But a White House representative
made it clear that the administration
wasn't about to have an argument on the
merits of the legislation. "Politically, I
would rather have pictures of a CEO
wearing an orange jumpsuit and shackles
than pictures of Osama bin Laden being
captured right now," he told a closed-door
meeting of RNC members.

The attitude on Capitol Hill is similar. Many
Republican House members pleaded with
their leaders to rubber-stamp the Senate
bill cracking down on corporate
wrongdoing, without even convening the
traditional conference committee to
resolve differences between the two
houses. Even veterans were sounding
retreat; Rep. Billy Tauzin of Louisiana,
chairman of the Energy and Commerce
Committee, said, "There are not enough
differences [of opinion] that we ought to
risk a conference on this bill in this
environment." In the end, Speaker Dennis
Hastert was able to insist on a conference, but only over the strenuous objections of
much of his rattled caucus. Some members openly said that all they cared about was
being able to fly home for the August recess clutching a piece of paper they could wave
in front of constituents and thus claim they did something.

Yesterday the House and Senate agreed on a compromise bill to crack down on corporate
wrongdoing. No one argues with the need to restore confidence among investors by
curbing the self-dealing practices that developed in some boardrooms during the 1990s.
But the bill is clearly overkill, fashioned in a political frenzy that was fueled by angry
investors looking for a scapegoat to blame for their shrinking portfolios. A study by
economists Kevin Hassett of the American Enterprise Institute and Robert Shapiro,
formerly of the Democratic Leadership Council, found that the bill will "likely impose
significant new costs on American firms with little likely benefit" while opening up
companies and their managers to more litigation from trial lawyers.

Pollsters fueled the panic among House Republicans. A survey by Public Opinion
Strategies warned that "the bottom has fallen out on the mood of the country. . . .
WorldCom's announcement may have been the straw that broke the camel's back." The
Republican firm's recommendation was clear: "Voters' attitudes toward corporate
offenders are hostile. Legislation punishing wrongdoers can't be too tough. Get out in
front on this issue now."

Other analysts were calmer. Charlie Cook, a veteran political handicapper, says that
"there is absolutely no evidence that the plunging stock market, the widening array of
corporate scandals and other negative news stories souring the public mood recently
have had a negative impact on a single Republican candidate in the country." At the
same time he warns that the conditions "that could lead to a bad election year for
Republicans seem to exist for the first time."

Some Republicans are distressed their party broke and ran as quickly as it did, given that
the groundwork for many of the corporate scandals was laid during the Clinton years.
They blame the Bush administration for refusing to point out a share of the blame belongs
to its predecessor. Polls suggest the public would be receptive to the message; a July
18-19 Newsweek survey found that while 47% of the public blames President Bush either
"a lot" or "some" for the corporate scandals, 54% blame Bill Clinton. And while 25% say
Mr. Bush bears no blame for the scandals, only 20% say the same for Mr. Clinton.

Despite the public's attitude, key Democratic figures have largely gotten a pass from
both the media and Republicans on their involvement in the corporate scandals. Global
Crossing, a company whose spectacular collapse rivals that of Enron, used cozy
relationships with the Clinton administration and a lack of government oversight to send
its stock price soaring to $64.25. Much of the company's value turned out to be built on
phony accounting. Terry McAuliffe, the 1996 Clinton-Gore finance chairman, who is now
head of the Democratic National Committee, rode Global Crossing's rise and turned his
$100,000 investment into $18 million.

Rep. Mark Foley, a Florida Republican who sits on the Ways and Means Committee, says
that if President Bush and Vice President Dick Cheney are to answer every conceivable
question about their business dealings, it's high time that someone ask some questions
about the Clinton years. Yesterday, he took to the House floor to ask that subpoenas be
issued for the testimony of Sen. Jon Corzine, a New Jersey Democrat, and Robert Rubin,
who served as Treasury secretary during the Clinton administration. Mr. Corzine was
chairman of Goldman Sachs when it was touting Enron stock. After he retired in 1999, he
spent $60 million of his fortune to win his Senate seat the following year.

Mr. Rubin had an even more direct connection. Citigroup, which he has headed since
1999, played a central role in concealing Enron's growing debts from investors and
regulators. Last November Mr. Rubin phoned Peter Fisher, a Treasury undersecretary, and
asked him to intervene with credit-rating agencies that were about to downgrade Enron's
status. John Diaz, a managing director of Moody's Investors Service, says Mr. Rubin also
contacted him about getting a higher credit rating for Enron. Both men rebuffed Mr.
Rubin's requests, which struck them as highly unusual.

With Congress about to leave town on its summer recess and an election fast
approaching, the next three months will see the corporate scandals played out on the
political instead of the policy arena. Right now, Democrats are dominating the field with
effective sound bites and vivid anecdotes. If Republicans are to avoid the political
shellacking they fear so much, they'd better find a way to fight back. Step 1: Don't
panic.

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